Correlation Between Snap and Obsidian Energy
Can any of the company-specific risk be diversified away by investing in both Snap and Obsidian Energy at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Snap and Obsidian Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Snap Inc and Obsidian Energy, you can compare the effects of market volatilities on Snap and Obsidian Energy and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Snap with a short position of Obsidian Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Snap and Obsidian Energy.
Diversification Opportunities for Snap and Obsidian Energy
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Snap and Obsidian is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Snap Inc and Obsidian Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Obsidian Energy and Snap is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Snap Inc are associated (or correlated) with Obsidian Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Obsidian Energy has no effect on the direction of Snap i.e., Snap and Obsidian Energy go up and down completely randomly.
Pair Corralation between Snap and Obsidian Energy
Given the investment horizon of 90 days Snap Inc is expected to generate 1.58 times more return on investment than Obsidian Energy. However, Snap is 1.58 times more volatile than Obsidian Energy. It trades about 0.09 of its potential returns per unit of risk. Obsidian Energy is currently generating about 0.07 per unit of risk. If you would invest 1,071 in Snap Inc on August 27, 2024 and sell it today you would earn a total of 71.00 from holding Snap Inc or generate 6.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Snap Inc vs. Obsidian Energy
Performance |
| Timeline |
| Snap Inc |
| Obsidian Energy |
Snap and Obsidian Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Snap and Obsidian Energy
The main advantage of trading using opposite Snap and Obsidian Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Snap position performs unexpectedly, Obsidian Energy can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Obsidian Energy will offset losses from the drop in Obsidian Energy's long position.The idea behind Snap Inc and Obsidian Energy pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Obsidian Energy vs. Baytex Energy Corp | Obsidian Energy vs. Vermilion Energy | Obsidian Energy vs. Canadian Natural Resources | Obsidian Energy vs. Ovintiv |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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